Brief Exercise 6-1 Morgan Spear invested $16,100 today in a fund that earns 8% c
ID: 2341394 • Letter: B
Question
Brief Exercise 6-1
Morgan Spear invested $16,100 today in a fund that earns 8% compounded annually.
Click here to view factor tables
To what amount will the investment grow in 3 years? To what amount would the investment grow in 3 years if the fund earns 8% annual interest compounded semiannually? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)
Open Show Work
Investment at 8% annual interest $ Investment at 8% annual interest, compounded semiannually $Explanation / Answer
1.We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.
Hence
A=$16100*(1.08)^3
=$16100*1.25971
=$20281(Approx).
2.We use the formula:
A=P(1+r/200)^2n
where
A=future value
P=present value
r=rate of interest
n=time period.
Hence
A=$16100(1+0.08/2)^(2*3)
=$16100*1.26532
=$20372(Approx).
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.